Monthly Markets Update (India) - September 2011
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Transcript of Monthly Markets Update (India) - September 2011
September 2011
Prepared by: iFAST Research Team
Monthly Markets Update - India September 2011
Key Points
The month of August saw all the major global indices showing a downward trend
The major event during the month was the downgrading of US debt by S&P
Indian markets were also severely impacted by the global events
We believe that Indian markets are presently undervalued and hence, advise investors to invest
at the current levels
We expect RBI to increase policy rates in the 16 September meet, as inflation is still above 9%
In the Mutual fund space, all the categories from the Equity and Hybrid segment delivered
negative month-on-month returns, while the debt segment gave positive returns during the
month
Monthly Markets Update - India September 2011
Equity Markets Update
International Markets (As at August 2011 end)
2011 2011 2010 P/E P/E P/E Earnings Growth
Earnings Growth
MTD YTD Return (%) Yr 2011 Yr 2012 Yr 2013 2011 (%) 2012 (%)
Asia ex Japan (MSCI Asia ex Japan) -10.16% -9.17% 17.00% 11.5 10.0 8.9 14.50% 15.30%
Emerging Markets (MSCI EM) -9.19% -9.83% 16.40% 10.2 9.0 8.1 17.40% 13.70%
Europe (Stoxx 600) -10.49% -14.29% 8.60% 9.9 8.8 8.1 7.60% 12.20%
Japan (Nikkei 225) -8.93% -12.45% -3.00% 14.5 12.8 10.4 8.60% 13.80%
USA (S&P 500) -5.68% -3.10% 12.80% 12.2 10.9 9.8 17.20% 12.30%
Australia (S&P/ASX 200) -2.90% -10.31% -2.60% 11.7 10.6 9.8 7.90% 10.50%
Brazil (IBOV) -3.96% -18.48% 1.00% 9.4 8.4 7.3 13.00% 11.70%
China (HS Mainland 100) -9.32% -9.41% 2.20% 10.0 8.7 7.7 22.90% 15.10%
Hong Kong (HSI) -8.49% -10.72% 5.30% 10.9 9.7 8.7 17.10% 12.80%
India (SENSEX) -8.36% -18.21% 17.40% 14.0 12.0 10.9 13.10% 16.60%
Indonesia (JCI) -7.00% 3.73% 46.10% 15.1 12.5 10.9 23.70% 20.40%
Malaysia (KLCI) -6.56% -4.72% 19.30% 14.3 12.6 11.4 6.90% 14.20%
Russia (RTSI$) -13.37% -3.84% 22.50% 5.4 5.1 5.0 50.90% 6.00%
Singapore (STI) -9.53% -10.19% 10.10% 13.4 12.2 10.8 5.30% 9.40%
South Korea (KOSPI) -11.86% -8.33% 21.90% 9.5 8.3 7.4 15.10% 14.80%
Taiwan (Taiwan Weighted) -10.44% -13.10% 9.60% 14.0 11.5 10.3 -6.80% 21.40%
Technology Heavy (NASDAQ 100) -5.15% 0.69% 19.20% 13.5 11.8 10.5 26.30% 14.00%
Thailand (SET Index) -5.60% 3.61% 40.60% 12.1 10.6 9.6 25.40% 14.20%
Monthly Markets Update - India September 2011
Global Market Performance
Group 7 Countries
Events
US Unemployment rate fell to 9.1% in Jul 11, down from 9.2% in Jun 11
US producer prices rose by 0.2% m-o-m in Jul 11, after a 0.4% m-o-m decline in Jun 11
2Q11 US GDP growth revised downwards to 1% q-o-q annualised (+1.3% previously), following 0.4% growth in 1Q 11
Germany Industrial production fell -1.1% m-o-m in Jun 11, after a downward-revised 0.9% rise in May 11
Germany GDP q-o-q grew 0.1% in Q2 2011, down significantly from a downward revised 1.3% growth in Q1 2011
Germany PMI manufacturing remained flat at 52 in Aug 11, literally unchanged from 52.1 in Jul 11 (lowest since Jul 2009)
France Industrial production fell -1.6% m-o-m in Jun 11, after a downward-revised 1.9% growth in May 11
France PMI manufacturing fell to 49.3 in Aug 11, down from an upward-revised 50.5 in Jul 11
UK Core CPI rose 3.1% in Jul 11, up from 2.8% in Jun 11
UK ILO unemployment rate rose to 7.9% in Jun 11, up from 7.7% in May 11
UK PMI manufacturing fell to 49.1 in Jul 11, down from an upward-revised 51.4 in Jun 11
Bank of Japan (BOJ) held its target rate unchanged at a range between 0% to 0.1% in Aug 11
Industrial production dropped -1.7% y-o-y in Jun 11 following a decrease of -5.5% in May 11
Market Outlook
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0.00%
Jap
an (
Nik
kei 2
25
)
USA
(S&
P 5
00
)
Can
ada
(S&
P/T
SX)
Ital
y (F
TSE
MIB
)
Ger
man
y (D
AX
)
Fran
ce (
CA
C-4
0)
UK
(FT
SE 1
00
)
Global Indices- G7 (MTD Returns)
Monthly Markets Update - India September 2011
August saw US lawmakers finally agree to raise the US debt ceiling, bringing an end to political bickering
which has resulted in heightened uncertainty among consumers, investors and businesses alike. Despite
this positive development, credit ratings agency S&P downgraded the US sovereign credit rating one
notch to AA+ on 5 August 2011, much to the chagrin of various high-profile investors like Warren Buffett
(who felt that the US should be a “quadruple-A”) and Bill Miller (who called the downgrade “precipitous,
wrong, and dangerous”). As per our comments on the issue when S&P first lowered its outlook on the
US sovereign debt rating in April 2011, we view the downgrade as largely symbolic, and see no
corresponding increase in default risk or any significant economic repercussions for the economy. Given
the weak growth seen in 1H 11 coupled with an anticipated slowdown in the Euro-zone, we now
forecast GDP growth to come in at just 1.6% for 2011.
Manufacturing PMI indices across Europe continued to show growing weakness, with the core nations
such as Germany, France and the UK showing manufacturing output is expected to contract following
several months of declining purchases. However, the same cannot be said for services which have seen a
broad-based rise in the continent.
Euro zone inflation for July maintained June’s pace of 2.5% on a year-on-year basis. Excluding volatile
components, core-inflation fell to a rate of 1.20% as compared to 1.60% year-on-year in June, within the
target range of the ECB. Following their interest rate hike on 7 July 2011, we believe that the ECB could
possibly be regretting its action as the rate hike now seems premature and worryingly reminiscent of
2008, when following a rate hike; the ECB was forced to retreat as the global financial system fell apart.
Japan’s ruling Democratic Party has chosen the present finance minister Yoshihiko Noda as its new
leader and the country’s sixth prime minister within five years. Noda has been widely regarded as a
fiscal hawk as he has consistently called for a painful fiscal consolidation in order to rein in the country’s
ballooning fiscal deficit. During the campaign, he had argued again that a tax rise is necessary if fiscal
resources still run short. Noda’s succession as prime minister could accelerate the consumption tax hike
which is negative to the economy.
The Japanese government could also accelerate its fiscal consolidation plan after Moody’s lowered its
credit rating to Aa3. The credit rating agency said large budget deficits as well as the highest debt-to-
GDP ratio in major countries are the crucial reasons that drive the downgrade. Besides, frequent
changes in administrations impeded the government to enact a long-term economic and fiscal policy.
Political deadlock is the major concern that could hinder the country’s long-term economic
development. In spite of the downgrade, the Japanese bond market is largely unaffected.
Monthly Markets Update - India September 2011
Asia Pacific (Ex Japan)
Events
Singapore’s Industrial production for Jul 11 increased 0.3% m-o-m, after an upward-revised 1.9% gain in Jun 11
Malaysia’s BNM may hold the Overnight Policy Rate at 3.0% for the rest of 2011 to accommodate economic growth
Malaysia’s GDP growth for 2Q 2011 y-o-y moderated to 4.0% from an upward revised 4.9% in 1Q 2011
Indonesia’s GDP second quarter y-o-y growth recorded 6.49%, marginally higher than first quarter, 6.47%
Indonesia’s Foreign reserves rose to $122.7 billion USD in July
Thailand’s 2Q 2011 GDP growth slowed to 2.6% y-o-y, down from an upward revised 3.2% growth in 1Q 2011
The Bank of Korea (BOK) held its benchmark 7-day repo rate unchanged at 3.25% in Aug 11
The Korean Consumer Price Index (CPI) grew at 4.7% y-o-y in Jul 11 compared to a 4.4% increase in Jun 11
Taiwan’s 2Q11 GDP grew 5.02% y-o-y, compared to 6.16% y-o-y growth 1Q11
Hong Kong’s 2Q11 GDP grew 5.1% y-o-y, compared to revised 7.5% y-o-y growth in 1Q11
Australia’s benchmark rate (RBA Cash Rate Target) stood at 4.75%
Australia’s Trade balance fell to AUD 2052 mil surplus in Jun 11 from revised upward AUD 2699 mil in May 11
Market Outlook
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Au
stra
lia
(S&
P/A
SX 2
00
)
Ho
ng
Ko
ng
(HSI
)
Ind
on
esia
(JC
I)
Mal
aysi
a (K
LCI)
Sin
gap
ore
(ST
I)
Sou
th K
ore
a (K
OSP
I)
Taiw
an (
Taiw
an
Wei
ghte
d)
Thai
lan
d (
SET
Ind
ex)
Global Indices- Asia Pacific (Ex Japan)
(MTD Returns)
Monthly Markets Update - India September 2011
Malaysia’s GDP growth for 2Q 2011 year-on-year moderated to 4.0% from an upward revised 4.9% in 1Q
2011, mainly due to the slowdown in investment and government spending. The sustained growth in
domestic consumption and the stronger growth in exports have mitigated the weaker growth in
investment and government spending. Going forward, exports growth and government spending may
fall as the global economic growth is expected to slow down and the government would like to reduce
its expenditure in order to lower the budget deficit.
Indonesia’s GDP second quarter year-on-year growth recorded 6.49%, marginally higher than first
quarter, 6.47%. Industry breakdown showed that the transport industry grew the fastest by 10.7%
followed by the hotel and restaurant industry and the construction industry which posted 9.6% and
7.4% respectively on year-on-year basis. Similarly, household spending expanded steadily, advancing
4.6% in the second quarter as compared to 4.5% in first quarter. GDP growth is expected to be sustained
in a strong pattern underpinned by the robust domestic consumption and rising investment. The risk of
heightened external uncertainties and slowdown in developed markets will feed into the real economy
going forward.
Thailand recorded a 2.6% year-on-year GDP growth in 2Q which is slower than the revised upward 3.2%
growth in the previous quarter and also missed the consensus forecast of 3.6% growth. This is mainly
due to the slower growth in exports resulted from the Japan natural disasters in March and the
slowdown in Europe and US economy. The economic growth in the Europe and US are expected to
further slowdown in the coming months which may further pressure Thailand’s economic growth. Let’s
look at some leading indicators for better judgment.
2Q11 Taiwan’s GDP grew 5.02% year-on-year. Although it grew faster than market forecasts, the
economy grew at the slowest pace since 2009. A slower growth is mainly due to the disruptive effects of
Japan’s earthquake. Exports only expanded 14.6% year-on-year in the 2Q11 as compared to a 19.5%
year-on-year growth in the 1Q11. The Taiwanese government also cut its forecast for 2011 GDP growth
to 4.81% from 5.01%.
Hong Kong’s GDP grew by 5.1% year-on-year in the second quarter of 2011. However, in terms of
quarterly growth, Hong Kong reported a 0.5% contraction in the second quarter as compared to the first
quarter 2011. Slower growth in exports is the key reason of the economic contraction as exports posted
an 11.1% quarter-on-quarter (0.3% year-on-year increase) drop in the 2Q11.
Monthly Markets Update - India September 2011
BRIC (Ex India) Countries
Events
Brazil’s IPCA Inflation rose to 6.9% y-o-y in Jul 11, up from 6.7% in Jun 11
Brazil’s CNI Capacity Utilisation fell to 82.3% in Jun 11, down from an upward-revised 82.5% reading in May 11
China’s Industrial production grew y-o-y by 14.0% in Jul 11 as compared with 15.1% increase y-o-y in Jun 11
China’s Exports increased 20.4% y-o-y in Jul 11 as compared with a 17.0% increase y-o-y in Jun 11
China’s Imports increased 22.9% y-o-y in Jul 11 as compared with a 28.0% increase y-o-y in Jun 11
Russia’s Industrial production expanded 5.2% y-o-y in Jul 11, after a 5.7% y-o-y increase in Jun 11
Russia’s 2Q 11 GDP grew by 3.4% y-o-y, down from 1Q 11 GDP growth of 4.1%
Russia’s PMI Manufacturing dropped from 50.6 in Jun 11 to 49.8 in Jul 11
Market Outlook
Brazil’s economic activity decelerated amidst a challenging external environment. Capacity utilisation
fell to 82.30% in June, down from an upward-revised 82.5% in May, falling short of consensus estimates
of an 82.20% rate. The PMI manufacturing index declined further to 47.8 in July 2011 (a reading below
50 indicates a contraction in manufacturing activity), significantly lower than its average reading of 53.6
for Q1 2011 as manufacturers remained downbeat amidst a slowdown in developed market growth. The
economic activity index posted its first negative reading for the year with a loss of -0.26% in July after
growing by a downward-revised 0.05% on a month-on-month basis in June. The economic data is as our
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Bra
zil (
IBO
V)
Ch
ina
(HS
Mai
nla
nd
10
0)
Ru
ssia
(R
TSI$
)
Global Indices- BRIC (Ex-India)- (MTD
Returns)
Monthly Markets Update - India September 2011
house view expected with the economy slowing due to the various measures mentioned in prior months
and the rate hikes implemented. Looking forward, we expect further cooling of the economy as global
growth slows.
Initially, the market expected to see the Chinese headline inflation peaking in June at 6.4% year-on-year.
However, July’s CPI surprised the market by accelerating to 6.5% year-on-year. Food costs jumped
14.8%, compared to 14.4% in June. Similar to the last inflation cycle, the rising food prices were
primarily driven by higher pork prices which surged 33.6% in July compared to a year earlier. Non-food
price inflation continues to rise gradually at 2.9% year-on-year compared to 3.0% in June. While inflation
failed to see a peak in June, the consensus still believes that inflation is ready to peak. Therefore, we do
not expect a sharp deceleration ahead as China is likely to experience inflation brought by price
pressures from the non-cyclical service sector.
Russia reported 2Q 11 GDP growth of 3.4% on a year-on-year basis. The figure showed a decline in
economic activity from 1Q 2011 and missed consensus estimates of 4.0% growth. With declining
manufacturing PMI over the course of 2Q, the results do not come as much of a surprise as industrial
production grew by 4.8% year-on-year, down from 5.9% from Q1 2011. Further drags on GDP growth
were provided by weakened domestic consumption as a result of high inflation which eroded purchasing
power.
Monthly Markets Update - India September 2011
INDIA Equity Market Outlook
Monthly Markets Update - India September 2011
India-Equity
Events
India’s Manufacturing Purchasing Managers’ Index is at 53.6 in July as compared to 55.3 in June.
Production at factories, utilities and mines increased to 8.8% in June as against 5.6% in May.
WPI Inflation for the month of July stands at 9.22% as against 9.44% in June 2011.
The YoY 1Q FY2011-12 GDP is at 7.7% as compared to GDP growth of 1Q FY 2010-11 at 8.8% a
year ago.
Market Outlook
The negative performance witnessed in the last month has continued even in August. BSE SENSEX and S&P CNX NIFTY have both lost 8.36% and 8.77% respectively. All the sectoral indices of BSE have witnessed negative performance. The BSE Realty Index, fell the most at 14.78% while the BSE FMCG index fell the least at -3.51%.
The concerns in US and Europe are the primary reasons for which the Indian equity market has shown a negative performance. With the inflation still continuing to be above 9%, we expect that the RBI will go for a rate hike in September.
Currently, the estimated P/E for SENSEX as on 30 August 2011 stands at 14.37X for fiscal 2011 (Ending March 2012) and 12.30X for fiscal 2012 (Ending March 2013).Estimated earnings growth for the market is at 9.36% and 16.77% for these two financial years.
Looking at the valuations, we feel that the Indian equity market is undervalued and investors can consider investing into the market at the current levels. However, the investors are advised that there can be some downward correction due to unfolding of the global events. However, for long term
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Sen
sex
Nif
ty In
dex
BSE
MID
CA
P
BSE
SM
ALL
CA
P
India Indices (MTD Returns)
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BSE
FM
CG
BSE
AU
TO
BSE
Oil
& G
as
BSE
-HC
BSE
CD
BSE
CG
BSE
Po
wer
BSE
IT
BSE
Ban
kex
BSE
MET
AL
BSE
Rea
lty
Sectoral Indices (MTD
Returns)
Monthly Markets Update - India September 2011
investors, the market is currently undervalued and investors can consider doing SIP to even out the volatility as seen in the equity market.
Monthly Markets Update - India September 2011
INDIA
Debt Market Outlook
Monthly Markets Update - India September 2011
India-Debt
The 10 year benchmark yields were on a downward trend until 10 August 2011; however, post 10 August 2011 the yields have risen a bit. Overall, the 10 year yields have fallen by 14 basis points in this month. This is unlike the past few months, where in the 10 year benchmark yields have gone up on a month on month basis. The drop in yields has led the Gilt category funds to deliver good returns in August. However, the liquidity condition in the system has improved but still continues to be in the deficit mode. With the inflation still above 9% in July, we expect the RBI to go for a rate hike in September policy meet. In this scenario, we advise:
Investors with a time horizon anywhere from 3 months to 24 months can lock-in their FMPs (available with varying maturities) at the prevailing high rates.
Investors with idle cash in the savings account should look at Ultra-Short Term Funds. Recommended Funds in this category include DWS Cash Opportunities fund and Birla Sunlife Ultra short term Fund .The suggested investment horizon for such instruments is about 3 months.
8.05
8.1
8.15
8.2
8.25
8.3
8.35
8.4
8.45
8.52
9-J
ul-
11
31
-Ju
l-1
1
2-A
ug-
11
4-A
ug-
11
6-A
ug-
11
8-A
ug-
11
10
-Au
g-1
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12
-Au
g-1
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g-1
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16
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g-1
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18
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20
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g-1
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22
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g-1
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24
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g-1
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26
-Au
g-1
1
28
-Au
g-1
1
30
-Au
g-1
1
10 Year G-sec Curve
Yields
Monthly Markets Update - India September 2011
Mutual Funds
Monthly Markets Update - India September 2011
Fund Category Returns
Fund Category Returns (as of August 2011)
1 Month 1 Year
Equity: Large Cap -7.88% -7.70%
Equity: Multi Cap -7.94% -9.47%
Equity: Mid Cap -7.66% -9.12%
Equity: ELSS -7.48% -8.33%
Equity: Index -8.45% -6.74%
Equity: Global -5.57% 4.66%
Hybrid: Balanced -5.64% -4.11%
Hybrid: MIP -0.66% 3.98%
Debt: Income 0.87% 6.55%
Debt: Gilt Short Term 0.79% 5.87%
Debt: Gilt Long Term 1.17% 5.63%
Debt: Floating Rate 0.78% 7.82%
Debt: Ultra Short Term 0.74% 7.43%
Debt: Short Term 0.83% 7.52%
Liquid 0.71% 7.49% Source: ACE MF, iFAST Compilations
(Excludes Institutional Plans)
All the categories from Equity and Hybrid segment have delivered negative month-on-month
returns; Debt segment on the other hand has given positive returns this month. Index funds
category has delivered highest negative returns across the three segments i.e. equity, debt and
hybrid for second consecutive month.
All three actively managed large cap, multi cap and mid cap categories have delivered negative
month-on-month returns. When compared to the performance of broader indices like Sensex
and Nifty, these actively managed categories gave slightly better negative returns with both the
broader indices delivering negative returns close to 8.36% and 8.77%, respectively.
In the Hybrid segment, performance of both the categories i.e. Monthly Income Plans and
Balanced funds was weighted down by negative performance of the equity part in the portfolio.
Global funds category has delivered negative returns for fourth consecutive month. However,
on a 1 year basis it is the only category in the equity segment which has delivered positive
returns.
Among the Debt segment performance of all the categories is seen in the positive territory from
quite some time. This is the fourth consecutive month where all the debt categories have
Monthly Markets Update - India September 2011
delivered positive month-on-month returns. Gilt Long term category has been the star
performer delivering highest positive returns of around 1.17% in the month of August.
Monthly Markets Update - India September 2011
Top and Bottom Performing Equity Funds in August
Top Performing Equity funds on our Platform in August 2011
Sector 1 Month 1 Year
BNP Paribas Equity Fund Large Cap -5.15% 0.00%
DSP BlackRock Top 100 Equity Fund Large Cap -5.80% -3.86%
CNX Nifty Index (Benchmark) -8.77% -7.43%
AIG India Equity Fund Multi-Cap -3.42% 0.46%
UTI Opportunities Fund Multi-Cap -5.26% 0.34%
CNX 500 Index (Benchmark) -8.72% -11.00%
IDFC Premier Equity Fund Plan A Midcap & Small Cap -3.09% -2.86%
Magnum Global Fund Midcap & Small Cap -5.06% -1.69%
CNX Midcap Index (Benchmark) -9.01% -15.96%
BNP Paribas Tax Advantage Plan (ELSS) ELSS -4.76% -2.62%
Edelweiss ELSS Fund ELSS -5.02% -6.73%
CNX 500 Index (Benchmark) -8.72% -11.00%
DSP BlackRock World Gold Fund Overseas 8.35% 18.01%
AIG World Gold Fund Overseas 6.87% 18.50%
MSCI World Index (in INR) (Benchmark) -4.49% 8.38%
Source: ACF MF, iFAST Compilations
Large Cap Funds
All the large cap funds have delivered negative returns on month-on-month basis. BNP Paribas Equity
Fund was the top performer in the category which delivered least negative returns close to 5.15%. This
fund continues to be among the top two funds for second consecutive month.
Multi Cap Funds
Both the funds in this category i.e. AIG India Equity Fund and UTI Opportunities Fund have delivered
negative month-on-month returns close to 3.42% and 5.26% respectively; they were the top two
performers in the previous month as well. UTI Opportunities Fund is our recommended fund in the multi
cap category.
Mid Cap Funds
In the Mid cap space, both the top two performing funds despite delivering negative returns have
performed better than their benchmark CNX Midcap Index. IDFC Premier Equity Fund Plan A and
Monthly Markets Update - India September 2011
Magnum Global Fund have given negative returns of around 3.09% and 5.06% whereas the benchmark
CNX Midcap Index has given negative returns close to 9.01%.
ELSS Funds
In the ELSS funds category, BNP Paribas Tax Advantage Plan (ELSS) and Edelweiss ELSS Fund are the top
two performing funds delivering negative returns close to 4.76% and 5.02% respectively.
Global Funds
Both the global funds i.e. DSP Black Rock World Gold Fund AIG World Gold Fund have delivered positive
month-on-month returns close to 8.35% and 6.87% respectively. With most global equity markets
witnessing a downfall this month, gold played its part of the safe haven asset. Out of 25 global funds on
our platform, only the top 3 funds i.e. DSP Black Rock World Gold Fund, AIG World Gold Fund and Birla
SunLife Commodity Equities Fund -Global Precious Metals Plan have delivered positive returns close to
8.35%, 6.87% and 5.36% respectively.
Monthly Markets Update - India September 2011
Bottom Performing Equity funds on our Platform in August 2011
Sector 1 Month 1 Year
Reliance Equity Fund Large Cap -9.85% -19.81%
Sundaram India Leadership Fund Large Cap -9.94% -7.66%
CNX Nifty Index (Benchmark) -8.77% -7.43%
Reliance Regular Savings Fund -Equity Option Multi-Cap -10.46% -13.76%
Birla Sun Life India Opportunities Fund Multi-Cap -11.32% -14.59%
CNX 500 Index (Benchmark) -8.72% -11.00%
Reliance Growth Fund Midcap & Small Cap -10.17% -15.32%
HSBC Midcap Equity Fund Midcap & Small Cap -14.28% -28.98%
CNX Midcap Index (Benchmark) -9.01% -15.96%
JM Tax Gain Fund ELSS -9.38% -21.10%
Reliance Tax Saver (ELSS) ELSS -9.59% -9.99%
CNX 500 Index (Benchmark) -8.72% -11.00%
Mirae Asset China Advantage Fund Overseas -10.99% -1.27%
HSBC Emerging Markets Fund Overseas -15.03% -5.26%
MSCI World Index (in INR) (Benchmark) -4.49% 8.38%
Source: ACF MF, iFAST Compilations
Large Cap Funds
In the large cap space, Reliance Equity Fund and Sundaram India Leadership Fund were the bottom two
performers delivering negative returns close to 9.85% and 9.94% respectively. The funds
underperformed their benchmark CNX Nifty Index which delivered slightly lower negative returns of
around 8.77%.
Multi Cap Funds
In the multi cap funds segment, both the bottom performing funds Reliance Regular Savings-Equity Fund
and Birla Sun Life India Opportunities Fund have underperformed its category average as well as the
benchmark i.e. CNX 500 Index. Both the funds have given negative returns of 10.46% and 11.32%
respectively.
Monthly Markets Update - India September 2011
Mid Cap Funds
In the mid cap space, both the bottom performing funds Reliance Growth Fund and HSBC Midcap Equity Fund have delivered negative return of around 10.17% and 14.28% respectively. Both the funds have underperformed their benchmark CNX Midcap Index which delivered negative returns close to 9.01%. ELSS Funds With respect to ELSS funds - JM Tax Gain Fund and Reliance Tax Saver (ELSS) were the bottom performers for August. While the former appeared to be among the bottom performers in the previous month as well, Reliance Tax Saver (ELSS) was among the top two performing ELSS funds in the previous month. Global Funds Both the global funds Mirae Asset China Advantage Fund and HSBC Emerging Markets Fund delivered
negative returns close to 10.99% and 15.03% respectively. Both the funds have underperformed the
benchmark MSCI World which delivered a negative return close to 4.49% in August.
Monthly Markets Update - India September 2011
Top and Bottom Performing Debt / Hybrid Funds in August
Balanced Funds
Both the top performing funds Canara Robeco Balance and Birla Sunlife Freedom Fund despite
delivering negative returns of 3.91% and 4.31% outperformed their benchmark Crisil Balanced Fund
Index, which delivered a negative return of 5.48% on a month-on-month basis.
Monthly Income Plans
The best performing funds in this category - Birla Sun Life MIP II-Savings 5 Plan and HDFC Multiple Yield
Fund Plan 2005 have delivered positive returns close to 0.52% and 0.28% respectively. Out of 39 funds
on our platform, only top 5 funds have delivered positive returns on month-on-month basis.
Income Funds
All the funds in this category have delivered positive month-on-month returns. Religare Active Income
Fund Plan A is the top performer among the income funds delivering positive returns close to 1.53%.
Top Performing Debt funds / Hybrid on our Platform in August 2011
Sector 1 Month 1 Year
Canara Robeco Balance Balanced -3.91% -1.30%
Birla Sunlife Freedom Fund Balanced -4.31% -5.14%
Crisil Balanced Fund Index -5.48% -2.61%
Birla Sunlife MIP II-Savings 5 Plan MIP 0.52% 6.84%
HDFC Multiple Yield Fund Plan 2005 MIP 0.28% 7.61%
Crisil MIP Blended Index -0.67% 3.98%
Religare Active Income Fund Plan A Income 1.53% 8.84%
Reliance Income Fund Income 1.34% 6.25%
Crisil Composite Bond Fund Index 0.79% 5.86%
DWS Gilt Fund Gilt - Long Term 1.78% 5.25%
DSP BlackRock Government Securities Fund Gilt - Long Term 1.77% 3.90%
I-BEX (I-Sec Sovereign Bond Index) 1.47% 6.94%
Religare Short Term Plan-Plan A Short Term 1.41% 6.99%
Principal Income Fund Short Term 0.96% 6.75%
Crisil Short-Term Bond Fund Index 0.81% 6.75% Source: ACF MF, iFAST Compilations
Monthly Markets Update - India September 2011
The fund also outperformed the benchmark Crisil Composite Bond Fund Index which delivered close to
0.79% in this month.
Gilt- Long term Funds
Gilt- Long Term Funds as a category outperformed all other categories in the debt segment. All the 26
Gilt- Long Term Funds on our platform delivered positive returns on month-on-month basis. DWS Gilt
Fund was the top performer in the month of August delivering a return of 1.78%.
Short Term Funds
In this segment, Religare Short Term Plan-Plan A and Principal Income Fund were the top performing
funds during the month delivering returns close to 1.41% and 0.96% respectively . Both the funds have
managed to give better returns than their benchmark Crisil Short-Term Bond Fund Index which
delivered 0.81% returns.
Monthly Markets Update - India September 2011
Balanced Funds
Reliance Regular Savings Fund-Balanced Option and Magnum Balanced Fund are the bottom performing
balanced funds for August delivering negative returns close to 7.79% and 7.81% respectively. Both the
funds have underperformed the Crisil Balanced Fund Index which delivered negative return of 5.48%.
Monthly Income Plans
In the MIP category, UTI MIS Advantage Plan and ICICI Prudential MIP 25 are the bottom performers on
month-on-month basis delivering negative returns close to 1.59% and 1.70% respectively. Both the
funds have underperformed their category average as well as the benchmark i.e. Crisil MIP Blended
Index which delivered a negative return of 0.66% and 0.67% respectively.
Income Funds
In the income funds segment, both the bottom performing funds i.e. Sundaram Bond Saver and Birla
Sun Life Medium Term Plan have delivered returns close to 0.27% and 0.08% respectively. They
underperformed the benchmark i.e. Crisil Composite Bond Fund Index. which delivered a return of
around 0.79% on a month-on-month basis.
Bottom Performing Debt / Hybrid funds on our Platform in August 2011
Sector 1 Month 1 Year
Reliance Regular Savings Fund-Balanced Option Balanced -7.79% -9.68%
Magnum Balanced Fund Balanced -7.81% -10.33%
Crisil Balanced Fund Index -5.48% -2.61%
UTI MIS Advantage Plan MIP -1.59% 4.05%
ICICI Prudential MIP 25 MIP -1.70% 4.22%
Crisil MIP Blended Index -0.67% 3.98%
Sundaram Bond Saver Income 0.27% 4.83%
Birla SunLife Medium Term Plan Income 0.08% 7.76%
Crisil Composite Bond Fund Index 0.79% 5.86%
Religare Gilt-Long Duration Plan Gilt - Long Term 0.47% 4.16%
JM G-Sec Fund Gilt - Long Term 0.42% 3.76%
I-BEX (I-Sec Sovereign Bond Index) 1.47% 6.94%
Mirae Asset Short Term Bond Fund Short Term 0.60% 5.39%
Goldman Sachs Short Term Fund Short Term 0.57% 5.86%
Crisil Short-Term Bond Fund Index 0.81% 6.75%
Source: ACF MF, iFAST Compilations
Monthly Markets Update - India September 2011
Gilt- Long term Funds
Both the bottom performing Gilt long term funds Religare Gilt-Long Duration Plan and JM G-Sec Fund
underperformed their benchmark which is I-BEX (I-Sec Sovereign Bond Index) on a month-on-month
basis. JM G-sec Fund continues to be the bottom performer for second consecutive month.
Short Term Funds
In this category, both Mirae Asset Short Term Bond Fund & *Goldman Sachs Short Term Fund continue
to be the bottom two performers for the second consecutive month as well. They delivered returns
around 0.60% and 0.57% respectively this month.
*Goldman Sachs Asset Management (India) Private Limited (GS AMC) has taken over the rights to
manage the Schemes from BAMC (Benchmark Asset Management Company )and has become the
investment manager of the Schemes with effect from 22 August 2011.
Monthly Markets Update - India September 2011
Recommended Portfolios Update
Monthly Markets Update - India September 2011
Recommended Portfolios Update
1. Conservative Portfolio:
Portfolio Objective:
The portfolio aims to achieve long term capital appreciation by investing 90% into bond funds and 10%
into equity funds. The target allocation may change depending on our views on financial markets.
Currently, we hold a neutral position in equities and we target to have an exposure of 90% to bond
funds and 10% to equity funds.
Total Investment: INR 1,00,000 Portfolio Absolute Return since inception: (Inception Date: 26 Feb 2010)
11.81%
Portfolio Value:
INR 1,11,807
August 2011 Portfolio Return:
-0.09%
Portfolio Commentary:
The Conservative portfolio gave a negative return of 0.09% in August. After delivering positive returns
for five consecutive months the portfolio fell into negative territory this month.
In the Debt segment, the short term funds have attributed close to 45% of the debt portfolio returns,
while the floating rate funds accounted for over 32% of the debt portfolio returns. Reliance Short Term
Fund with 16.95% returns followed by Canara Robeco Floating Rate Fund with 16.52% returns
accounted for most of the debt portfolio returns.
In the domestic equity funds, both HDFC Top 200 Fund and UTI Dividend Yield Fund gave negative
returns. However, HDFC Top 200 Fund accounted for 62% of the negative equity portfolio returns
followed by UTI Dividend Yield Fund.
2. Moderately Conservative Portfolio:
Portfolio Objective:
The portfolio aims to achieve long term capital appreciation by investing 70% into bond funds and 30%
into equity funds. The target allocation may change depending upon our views on financial markets.
Currently, we hold a neutral position in equities and we target to have an exposure of 70% to bond
funds and 30% to equity funds.
Total Investment: INR 1,00,000 Portfolio Absolute Return since inception: (Inception Date: 26 Feb 2010)
10.72%
Portfolio Value:
INR 1,10,720
August 2011 Portfolio Returns:
-1.96%
Monthly Markets Update - India September 2011
Portfolio Commentary:
The Moderately Conservative portfolio gave a negative return of 1.96% in August. The portfolio returns
were negative on account of negative performance of the equity funds despite the positive performance
of debt funds.
In the Debt category, the short term funds attributed close to 43% of the debt portfolio returns, while
the floating rate funds accounted for close to 28% of the debt portfolio returns. Reliance Short Term
Fund with 22% returns followed by Birla Sunlife Dynamic Bond Fund with 16% returns accounted for
most of the debt portfolio returns .
In the domestic equity funds, all the three funds have given negative returns. However, the two large
cap funds i.e. HDFC Top 200 Fund and ICICI Prudential Focused Blue Chip Equity Fund together
accounted for 75% of the negative equity portfolio returns.
3. Balanced Portfolio:
Portfolio Objective:
The portfolio aims to achieve long term capital appreciation by investing 50% into bond funds and 50%
into equity funds. The target allocation may change depending upon our views on financial markets.
Currently, we hold a neutral position in equities and we target to have an exposure of 50% to bond
funds and 50% to equity funds.
Total Investment: INR 1,00,000 Portfolio Absolute Return since inception: (Inception Date: 26 Feb 2010)
10.63%
Portfolio Value:
INR 1,10,627
August 2011 Portfolio Returns:
-3.66%
Portfolio Commentary:
The Balanced portfolio gave a negative return of 3.66% in August. The portfolio gave positive returns for
two consecutive months before appearing in the negative territory in the month of August.
Among the Debt funds, the short term funds have attributed close to 50% of the debt portfolio returns,
while the floating rate funds was the next best category accounting for close to 29% of the debt
portfolio returns. Reliance Short Term Fund with 30% returns followed by Birla Sunlife Floating Rate
Fund- Long term Plan with 19% returns accounted for most of the debt portfolio returns.
Monthly Markets Update - India September 2011
In the domestic equity funds, all the equity funds in the portfolio have given negative returns. Out of
three large cap funds, two of them i.e. HDFC Top 200 Fund and ICICI Prudential Focused Blue Chip Equity
Fund have lost the maximum of all the equity funds in the portfolio. Both the funds together accounted
for 58% of the negative equity portfolio returns. UTI Dividend Yield Fund has lost the least of all the
equity funds in the portfolio.
4. Moderately Aggressive Portfolio:
Portfolio Objective:
The portfolio aims to achieve long term capital appreciation by investing 30% into bond funds and 70%
into equity funds. The target allocation may change depending upon our views on financial markets.
Currently, we hold a neutral position in equities and we target to have an exposure of 30% to bond
funds and 70% to equity funds.
Total Investment: INR 1,00,000 Portfolio Absolute Return since inception: (Inception Date: 26 Feb 2010)
10.74%
Portfolio Value:
INR 1,10,737
August 2011 Portfolio Returns:
-5.95%
Portfolio Commentary:
The Moderately Aggressive portfolio gave a negative return of 5.95% in August. The returns were
negative on account of negative performance of the equity funds in the portfolio.
In the Debt funds category, Birla Sunlife Floating Rate Fund- Long term Plan with 29% returns and ICICI
Prudential Gilt Fund- Investment Plan with 23% returns accounted for most of the debt portfolio
returns.
In the domestic equity funds, the mid cap category accounted for 30% of the negative equity portfolio
returns followed by sector funds which accounted for close to 28% of the negative equity portfolio
returns. Reliance Banking Fund alone accounted for 22% of the negative equity portfolio returns. The
UTI Opportunities Fund has lost the least of all the negative performing funds in the portfolio accounting
for only 4% of the negative equity portfolio returns.
5. Aggressive Portfolio:
Portfolio Objective:
The portfolio aims to achieve long term capital appreciation by investing 10% into bond funds and 90%
into equity funds. The target allocation may change depending upon our views on financial markets.
Monthly Markets Update - India September 2011
Currently, we hold a neutral position in equities we target to have an exposure of 10% to bond funds
and 90% to equity funds.
Total Investment: INR 1,00,000 Portfolio Absolute Return since inception: (Inception Date: 26 Feb 2010)
12.40%
Portfolio Value:
INR 1,12,398
August 2011 Portfolio Returns:
-7.63%
Portfolio Commentary:
The Aggressive portfolio gave a negative return of 7.63% in August. The negative portfolio returns is
owing to higher weightage to equity part in the portfolio which has delivered negative returns.
In the debt category, both the funds delivered positive month-on-month returns. ICICI Prudential Gilt
Fund- Investment Plan alone accounted for 58% of the debt portfolio returns.
In the domestic equity funds, the sector funds category i.e. Reliance Banking Fund, ICICI Prudential
Infrastructure Fund and Reliance Pharma Fund followed by the midcap oriented funds i.e. HDFC Midcap
Opportunities Fund and DSP Blackrock Small and Midcap Fund have accounted for 34% and 33%
respectively of the negative equity portfolio returns.
6. Moderately Aggressive (Global) Portfolio:
Portfolio Objective:
The portfolio aims to achieve long term capital appreciation by investing 30% into bond funds, 46% in
domestic equity funds and 25% in global equity funds. The target allocation may change depending
upon our views on financial markets. Currently, we hold a neutral position in equities and we target to
have an exposure of 30% to bond funds, 46% to domestic equity funds and 25% to global equity funds.
Total Investment: INR 1,00,000 Portfolio Absolute Return since inception: (Inception Date: 26 Feb 2010)
10.85%
Portfolio Value:
INR 1,10,847
August 2011 Portfolio Returns:
-5.53%
Portfolio Commentary:
The Moderately Aggressive (Global) portfolio gave a negative return of 5.53% in August. The returns
were negative on account of negative performance of the domestic and global equity funds in the
portfolio.
Monthly Markets Update - India September 2011
In the Debt funds category, Birla Sunlife Floating Rate Fund- Long term Plan with 30% returns and ICICI
Prudential Gilt Fund- Investment Plan with 22% returns accounted for most of the debt portfolio
returns.
In the domestic equity funds, the midcap oriented funds i.e. HDFC Midcap Opportunities Fund and DSP
Blackrock Small and Midcap Fund have accounted for 30% of the negative equity portfolio returns.
In the global equity funds, both the global funds i.e. Mirae Asset China Advantage Fund and Principal
Global Opportunities Fund have given negative returns. However Mirae Asset China Advantage Fund
alone accounted for 66% of the negative global equity portfolio returns.
7. Aggressive (Global) Portfolio:
Portfolio Objective:
The portfolio aims to achieve long term capital appreciation by investing 10% into bond funds, 59% into
domestic equity funds and 31% into global equity funds. The target allocation may change depending
upon our views on financial markets. Currently, we hold a neutral position in equities and we target to
have an exposure of 10% to bond funds, 60% to domestic equity funds and 30% to global equity funds.
Total Investment: INR 1,00,000 Portfolio Absolute Return since inception: (Inception Date: 26 Feb 2010)
11.07%
Portfolio Value:
INR 1,11,070
August 2011 Portfolio Returns:
-7.22%
Portfolio Commentary:
The Aggressive (Global) portfolio gave a negative return of 7.22% in August. The returns were negative
on account of negative performance of the domestic and global equity funds in the portfolio.
In the debt category, both the funds delivered positive month-on-month returns. ICICI Prudential Gilt
Fund- Investment Plan alone accounted for 56% of the debt portfolio returns.
In the domestic equity funds, the sector funds category i.e. Reliance Banking Fund, ICICI Prudential
Infrastructure Fund and Reliance Pharma Fund followed by the midcap oriented funds i.e. HDFC Midcap
Opportunities Fund and DSP Blackrock Small and Midcap Fund have accounted for 31% and 29%
respectively of the negative equity portfolio returns. .
In the global equity funds, both the global funds i.e. Mirae Asset China Advantage Fund and Principal
Global Opportunities Fund have given negative returns. However, Mirae Asset China Advantage Fund
alone accounted for 57% of the negative global equity portfolio returns.
Monthly Markets Update - India September 2011
Fund Focus
Monthly Markets Update - India September 2011
Fund Focus: ICICI Prudential Infrastructure Fund
Infrastructure is a key sector for any economy. Infrastructure is a broad sector consisting mainly of
transportation (land, air and water), telecommunication, energy (Oil and Gas and Power) and finance
sub sectors. Good public infrastructure not only directly contributes to robust economic growth but also
indirectly enables other sectors contribute more towards economic growth; therefore, good public
Infrastructure sector is an enabler for economic growth.
Lack of public infrastructure is one of the key reasons hampering the economic growth of India.
However, the government has woken up from its lethargic attitude towards public infrastructure. The
focus on infrastructure spending is seen in the budget speech of 2011-12. However, certain bottlenecks
remain and the government is working to resolve them from the policy perspective.
Infrastructure as an investment
India is expected to invest $1 trillion in public infrastructure development in its 12th five year plan
between 2012 and 2017. The economic survey for 2011-12 states that atleast 50% of this $1 trillion is
expected to be made from the private sector. Since, most of the infrastructure projects are mostly
monopolistic in nature (ports, roads, etc) investors can expect good returns from Infrastructure
investments.
Government has enabled higher inflows directly into the infrastructure space on the debt side in order
to meet the huge investments demands in the sector. The government has raised the limit for FII
participation into infrastructure debt space from $5 billion to $25 billion in the budget for 2011-12.
This sector holds potential to generate long term returns for the patient investor as infrastructure
projects has long gestation periods. Our recommended fund in infrastructure space is ICICI Prudential
Infrastructure fund.
Investment strategy of ICICI Prudential Infrastructure fund
The ICICI Prudential Infrastructure fund invests across market cap, but has a high concentration towards
large caps. Between February 2008 and July 2011, the fund on an average had over 68% exposure of the
portfolio to large cap stocks. Exposure to mid cap stocks was on an average close to 8.3%, while
exposure to the small cap stocks was limited to around 4.7% between February 2008 and July 2011 .
Cash holding on an average was close to 8.4% between February 2008 and July 2011. The fund does take
exposure to derivatives. However, much of the exposure is in futures while the use of options is
sporadic. The exposure to futures was on an average of 5.7% between February 2008 and July 2011.
Banking, Refineries, Power generation/distribution, telecom and Oil exploration sectors are the top five
sectors to which the fund has exposure to. Between February 2008 and June 2007, Banking has an
average exposure of 12.7% of the portfolio, followed by Refinery at 10%, which is further followed by
power sector having 9.7%, telecom 8.1% while Oil exploration sector having 6.4% exposure.
Monthly Markets Update - India September 2011
Performance
Infrastructure sector’s performance as a whole has been continuously lagging since the greater part of
2010 till today. This can be seen in chart 1. CNX Infrastructure is the benchmark for this fund. If you had
invested INR 10,000 into this fund on 30 April 2008, this INR 10,000 would have been worth INR 8870 as
at 30 August 2011.
This laggard performance is actually an investment opportunity in disguise for the long term investor.
The prospects of this sector are bright as huge investments are made into the infrastructure space by
both private investors and government.
Chart 1: Performance of ICICI Prudential Infrastructure fund, other top performing infrastructure
funds and CNX Nifty.
30
40
50
60
70
80
90
100
110
120
130
30
-Ap
r-0
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-Ju
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-Oct
-08
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-Dec
-08
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-Feb
-09
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-Ap
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-Ju
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-Au
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-Oct
-09
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-Dec
-09
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-Feb
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-Ap
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-Oct
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-Dec
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-Feb
-11
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-Ap
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n-1
1
AIG Infra & Eco Reform DSPBR India T.I.G.E.R
ICICI Pru Infrastructure CNX Infrastructure
Performance of ICICI Prudential Infrastructure Fund
Monthly Markets Update - India September 2011
Table 1: Performance of funds in percentage
Scheme Name 6 Months 1 Year 3 Years 5 Years
AIG Infrastructure & Economic Reform Fund 6.46 -5.59 9.52
DSP Black Rock India T.I.G.E.R Fund -5.05 -19.17 3.47 8.71
ICICI Prudential Infrastructure Fund -6.88 -13.58 1.39 11.70
CNX Infrastructure -1.08 -18.07 -8.40 2.75
Source: iFAST Compilations, performance above 1 year is in CAGR terms and performance below 1 year is in absolute terms. Performance as on 30 August 2011
Our take on the Fund
The growth in the infrastructure sector is a must for our economy to continue to grow at high current
growth rate. With the 12th plan expecting about US$ 1 trillion being invested into the infrastructure
space and atleast 50% of this US$ 1 trillion being invested by the private investors, there are good
opportunities for patient investors in this sector.
ICICI Prudential Infrastructure fund is the best performing infrastructure fund despite the lack luster
performance of this sector in the past year. However, investors can use the laggard performance to
enter into this fund. Moreover, we recommend the investors to hold their investments into this fund for
atleast five years to realise the growth benefits of the sector.